Help your clients involve their children in finances

Research shows parents’ attitudes to finances play a big role in how a child grows up to manage money, so it’s important for parents to think about the subliminal signals they might be sending. This article is a great resource for parents who are trying to teach their children to be financially savvy.

Five ways to involve your kids in money matters

  1. Explain the concept of setting goals and saving towards them by managing their money. Have an open discussion with your children about your household budget and expenses, so they know that you can’t afford everything. Also, whether you decide to give your children a monthly allowance or prefer them to earn their own pocket money by doing household chores, teach them the basics of budgeting. This can include practical trade-offs, for example, choosing between having a bigger birthday party or a bigger present.
  2. Set family goals and include them in aspects of the planning. If a holiday is on the cards, agree as a family to cut back on expenses to save for the trip.
  3. Help them differentiate between a want and a need.Giving them a clear understanding of essential versus non-essential costs will help prevent them from falling into a debt trap in later life. Teach them to manage their pocket money and set up a monthly budget to help separate needs (toiletries, data and airtime) from wants (entertainment).
  4. Track their spending. At the end of each month, sit together to track what they’re spending to help reinforce an awareness of good spending habits.
  5. Open a bank account for them. This allows them to learn the power of compound interest and long-term savings and it’s a good way to teach them about safe online behaviour.

Four money mistakes to avoid

  1. Not ‘walking the talk’. It’s no good preaching about the importance of being prudent with money and saving for a rainy day while behaving to the contrary. Help your kids develop healthy money habits by watching you.
  2. Don’t tell kids too much about your financial circumstances, for example, regarding your assets and your household income. Use your discretion about how much of your financial affairs you divulge – unless you don’t mind this information being shared on the school playground!
  3. Don’t give in to your child’s requests to buy things every time they ask. Today’s digitally engaged kids are bombarded with marketing messages from brands and are often far more materialistic than earlier generations. Encourage them to save for items they’d like or to wait for special life events.
  4. Parents having very different attitudes to money.This can damage the family relationship and be confusing for kids who are picking up cues from both parents. A unified, responsible approach to money will be far more beneficial to them in the long run.

Danelle van Heerde is the Head of Advice Processes and Tools at Sanlam.

This article appeared in Personal Finance